South Korean firms need to boost transparency by reforming their accounting standards and overhauling corporate governance to regain investors' confidence, the nation's top financial regulator said Friday.

Choi Jong-ku, chairman of the Financial Services Commission, made the remarks during a meeting with chief executives earlier in the day.

Although some South Korean firms have improved their management ethics, critics say murky business decisions and an opaque governance structure are two of the key reasons for the relatively low value of South Korean stocks, compared with other Asian peers.

Financial Services Commission Chairman Choi Jong-ku speaks during a meeting with chief executives on Nov. 24, 2017. (Yonhap)

"For institutional investors, key players of capital markets, to make mid- and long-term value investments, there is the need for corporate transparency throughout accounting reforms and a modernization of corporate governance structure," Choi told the meeting.

Because of a lack of corporate transparency, South Korean stock markets valued about 42 percent lower than global markets as of July, Choi said.

Choi said the FSS is pushing for corporate accounting reforms because it is difficult for companies to independently do so.

The FSS plans to introduce tougher rules on corporate accounting standards by the end of this year.

FSS officials said an independent audit into family-run business conglomerates, or chaebol, is difficult in South Korea due to their opaque governance system. 

An FSS-appointed advisory panel for financial reforms recently decided to advise the FSS to set a guideline that financial firms need to appoint board members recommended by their labor unions. 

Asked about the matter, Choi replied that an agreement between management and labor of the financial industry should be reached before the industry adopt such a system. 

Choi also played down the decision by the advisory panel, saying it is not an official stance of the government. (Yonhap)